[이코노미스트] No top luxury goods in the largest department stores? ‘The Hyundai Seoul’

Shinsegae Times Square and Lotte Headquarters are expected to have a difficult strategy

The Hyundai Department Store’The Hyundai Seoul’, which will open in Yeouido, Seoul on February 26, is now open without a single top luxury brand, with the modifier of’The largest mammoth-class department store in Seoul’. It was found that Louis Vuitton, Chanel, and Hermes, which are called “three luxury goods” in the department store industry, are not entering the Hyundai Seoul.

Of course, it is not uncommon for all three brands to enter the store at the time of opening. Currently, only six domestic department stores have all three brands. However, it is also rare for a major department store in Seoul to have no one of these three brands. This is the reason why it is evaluated as a department store that is’mammoth-class’ only in scale and has no decent luxury store.

The Hyundai Seoul has 7 floors below the ground and 8 floors above the ground, with an operating area of ​​89,100 square meters (27,000 pyeong). This is comparable to the largest scale in Seoul and the largest scale in the metropolitan area of ​​Hyundai Department Store’s Pangyo branch, 9,2416m2 (28,055 pyeong). The landscaping space alone is 11,240 square meters (3,400 pyeong).

In preparation for The Hyundai Seoul, Hyundai Department Store revealed its goal to grow this store into a’global culture and tourism hub’. It is a strategy to attract domestic consumers and foreign tourists by making full use of the local strength of’Yeouido’ located in the middle of Seoul. This is the reason why’Seoul’ was used instead of the name of a building or district such as Gu and Dong in the store name. In this regard, Hyung-jong Kim, president of Hyundai Department Store, said, “Based on the largest scale and business area in the Seoul area, we have introduced unconventional and innovative content that utilizes the Hyundai Department Store Group’s 50-year distribution capabilities and know-how, making’The Hyundai Seoul’ the representative life of Seoul, Korea. We have expressed our ambitions as “a policy to grow as a style landmark”.

However, industry insiders are anticipating the difficulties of The Hyundai Seoul, where even one of the three luxury brands could not be opened. A department store official said. “At the time of its initial setting, The Hyundai Seoul aimed to attract all customers of the Shinsegae Times Square and Lotte headquarters. However, in the current situation, what can be the number of consumers at the Shinsegae Times Square store, which Louis Vuitton entered, and the Lotte main store, which Louis Vuitton and Chanel entered, to lead? Overseas luxury goods account for the largest portion of department store sales. There may be a lot of visitors to visit, but luxury shoppers who increase sales cannot find it.”

Currently, there are 20 domestic department stores where Louis Vuitton has entered, 8 stores have Chanel, and 8 stores have Hermes. There are six department stores that have all three brands: Shinsegae Main Store, Shinsegae Gangnam Store, Shinsegae Centum City Store, Hyundai Main Store, Lotte Jamsil Avenuel, and Galleria Luxury Store. Except for the Shinsegae Centum City branch, all five department stores are located in Seoul.

In particular, the Shinsegae Times Square store, located 2.5 km from The Hyundai Seoul, is a solid luxury store with Louis Vuitton, and recorded good results with improved sales despite the Corona 19 incident. It recorded 4714 billion won in sales in 2020, an increase of 3.2% from 2019.

Hyundai Department Store side said, “It is true that Louis Vuitton, Chanel, and Hermes have not yet decided to enter the store.” The Hyundai Department Store Pangyo branch, which exceeded 1 trillion won in annual sales in the shortest period, also did not have three brand stores when it opened. Louis Vuitton also entered the store four months after opening.”

[이코노미스트]Excluding the head offices of each department store, which has been open for decades, looked at department stores that were relatively recently opened. First, the Shinsegae Times Square store, which opened in 2009, was opened by Louis Vuitton, and the Shinsegae Centum City store, which opened in the same year, was opened by Louis Vuitton, Chanel, and Hermes. Lotte Jamsil Avenuel, which opened in 2014, also opened three brands with the opening.

However, as explained by Hyundai Department Store, it is not easy to enter the three major luxury brands at the same time as the department store opens. Another department store official explained. “All three brands are global luxury brands headquartered overseas, and they manage the number of stores globally. In order to maintain the brand’s premium image, the number of stores is limited by region, but there are already brand stores in the metropolitan area, so there will be no plans to open new stores in particular. In the case of Louis Vuitton, which has a relatively larger number of stores than Chanel and Hermes, it can be said that it is easier to attract them. However, this will not be easy as there is already a store in the Shinsegae Times Square store near The Hyundai Seoul.”

It is also difficult to compete with department stores and luxury brands. This is an analysis of multiple department stores. “From a department store’s point of view, entering the top three luxury brands is a great force to increase sales, so they try to enter the store, but they often compete with fee negotiations. Normally, department store fees range from 40% to as much as 70%, but famous foreign luxury brands receive the lowest fees. To cover the operating costs, department stores will continue to negotiate fees. The Seoul Hyundai must have been concerned about it even before the opening, but it seems that the negotiations were not satisfactory.”

On the other hand, The Hyundai Seoul does not have the three major luxury brands, but the entire first floor is planned to be decorated as a luxury hall. Currently, 21 brands have been confirmed, including Gucci, Saint Laurent, Valenciaga, Bottega Veneta, Burberry, Prada, and Fendi. An official at Hyundai Department Store said, “The Hyundai Seoul is currently negotiating with a number of luxury brands such as Louis Vuitton, and plans to continue to reinforce luxury brands after opening.”

Reporter La Ye-jin [email protected]